An Overview of Domestic and Overseas Markets In House Congress, Mumbai At Grand Hyatt, April 29, 2008
 
<ul><li>Domestic Stock Exchanges </li></ul><ul><ul><li>Initial Public Offering (“IPO”) </li></ul></ul><ul><ul><li>Offer fo...
 
<ul><li>Companies Act, 1956 </li></ul><ul><li>Securities and Exchange Board of India Act, 1992 </li></ul><ul><li>SEBI (Dis...
<ul><li>Eligibility criteria for primary issuance (IPO or Offer for Sale) </li></ul><ul><ul><li>Rs. 3 Crores (Net Tangible...
<ul><li>Book Building Method </li></ul><ul><ul><li>50% net offer to QIBs ; OR </li></ul></ul><ul><ul><li>‘ Project’ has 15...
<ul><li>Exemptions from eligibility criteria </li></ul><ul><ul><li>a banking company  </li></ul></ul><ul><ul><li>a corresp...
<ul><li>Pricing  </li></ul><ul><ul><li>Free pricing of shares </li></ul></ul><ul><ul><li>Issuer company free to fix face v...
<ul><li>Fast Track Method </li></ul><ul><li>(Introduced by SEBI in November 2007) </li></ul><ul><ul><li>Listed companies m...
<ul><li>Other Requisites for public offerings </li></ul>
<ul><li>Issue of shares or of convertible securities by a company to a select group of persons under Section 81(IA) of the...
<ul><li>Issue of shares or of convertible securities by a company to Qualified Institutional Buyers (“QIBs”)  (Chapter XII...
<ul><li>Conditions: </li></ul><ul><li>Minimum Number of allottees: </li></ul><ul><ul><li>2, where the issue size is less t...
<ul><li>Credit rating required </li></ul><ul><li>Debenture trustee must be appointed </li></ul><ul><li>Debentures not to b...
<ul><li>SEBI  (Substantial Acquisition of Shares and Takeovers)  Regulations 1997  (Takeover Code) </li></ul><ul><li>SEBI ...
New exchange for SMEs 21 days gap between closing and listing to be shortened to 7 days QIBs to pay 100% upfront for IPOs
<ul><li>Indian Companies can raise capital overseas by issue of: </li></ul><ul><li>Note:  Indian companies listing oversea...
<ul><ul><li>Companies Act, 1956 </li></ul></ul><ul><ul><li>SEBI DIP Guidelines </li></ul></ul><ul><ul><li>Issue of Foreign...
<ul><li>DRs  represent shares   of an Indian company trading on a foreign stock exchange </li></ul><ul><li>The DR holders ...
<ul><li>Foreign currency convertible bonds are  debt instruments which are convertible into equity   of the company at a l...
<ul><ul><li>FCEB Scheme was notified on February 15, 2008 </li></ul></ul><ul><ul><li>A security offered by an issuing comp...
<ul><ul><li>RBI is still considering the instrument </li></ul></ul><ul><ul><li>No guidelines for FCEBs issued by RBI yet <...
<ul><ul><li>Choice of stock exchange depends upon: </li></ul></ul><ul><ul><li>New York Stock Exchange (NYSE) </li></ul></u...
<ul><ul><li>NASDAQ </li></ul></ul><ul><ul><ul><li>Listing is expensive </li></ul></ul></ul><ul><ul><ul><li>3  Indian compa...
<ul><ul><li>Luxembourg Stock Exchange (LuxSE) </li></ul></ul><ul><ul><ul><li>Traditional favourite </li></ul></ul></ul><ul...
<ul><ul><li>Dubai International Financial Exchange (DIFX) </li></ul></ul><ul><ul><ul><li>Set up in September 2005 </li></u...
 
GDP growth forecast for India: 2008-09 CMIE 9.5% IBs 7.0 to 8.4% IMF 7.9% GDP growth in India: 2007-08 – 8.7% Inflation sc...
Rs.  39,98,887  Crores Money supply in the economy as on March 03, 2008 Interest Rates Representing a Y on Y increase of 2...
<ul><ul><li>Although there are negative factors like the  gloomy global markets ,  pressure on the export market  due to  ...
 
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  • Slide 1 - Paras Kuhad

    1. 1. An Overview of Domestic and Overseas Markets In House Congress, Mumbai At Grand Hyatt, April 29, 2008
    2. 3. <ul><li>Domestic Stock Exchanges </li></ul><ul><ul><li>Initial Public Offering (“IPO”) </li></ul></ul><ul><ul><li>Offer for Sale </li></ul></ul><ul><ul><li>Public Issue by Listed Companies including Rights Issue </li></ul></ul><ul><ul><li>Qualified Institutions Placement (“QIP”) </li></ul></ul><ul><ul><li>Preferential Allotment </li></ul></ul>
    3. 5. <ul><li>Companies Act, 1956 </li></ul><ul><li>Securities and Exchange Board of India Act, 1992 </li></ul><ul><li>SEBI (Disclosures and Investor Protection) Guidelines , 2000 (“DIP Guidelines”) </li></ul><ul><li>Securities Contracts (Regulation) Act, 1956 </li></ul><ul><li>Listing Agreements with the Stock Exchanges </li></ul><ul><li>The Depositories Act, 1996 </li></ul><ul><li>Foreign Exchange Management Act, 1999 (“FEMA”) </li></ul>
    4. 6. <ul><li>Eligibility criteria for primary issuance (IPO or Offer for Sale) </li></ul><ul><ul><li>Rs. 3 Crores (Net Tangible Assets) in last 3 years </li></ul></ul><ul><ul><li>Rs. 1 Crore (Net Worth) in last 3 years </li></ul></ul><ul><ul><li>Distributable profits for 3 years in last 5 years </li></ul></ul><ul><ul><li>In case of change of name, 50% revenues from activity suggested by new name </li></ul></ul><ul><ul><li>Aggregate of all issues in one financial year not to exceed 5 times issuer’s pre issue net worth </li></ul></ul>
    5. 7. <ul><li>Book Building Method </li></ul><ul><ul><li>50% net offer to QIBs ; OR </li></ul></ul><ul><ul><li>‘ Project’ has 15% participation from financial institutions/scheduled commercial banks of which 10% comes from appraisers </li></ul></ul><ul><ul><li>AND </li></ul></ul><ul><ul><li>10 Crores minimum post issue face value capital; OR </li></ul></ul><ul><ul><li>2 years of compulsory market making post issue </li></ul></ul>
    6. 8. <ul><li>Exemptions from eligibility criteria </li></ul><ul><ul><li>a banking company </li></ul></ul><ul><ul><li>a corresponding new bank </li></ul></ul><ul><ul><li>an infrastructure company (conditions apply) </li></ul></ul><ul><ul><ul><li>Project must be appraised </li></ul></ul></ul><ul><ul><ul><li>Not less than 5% of the project cost must be from appraisers </li></ul></ul></ul><ul><ul><li>rights issue by a listed company </li></ul></ul>
    7. 9. <ul><li>Pricing </li></ul><ul><ul><li>Free pricing of shares </li></ul></ul><ul><ul><li>Issuer company free to fix face value of the shares offered subject to: </li></ul></ul><ul><ul><ul><li>If price of share is Rs. 500 or more, then face value can be less than 10 but must be more than Re. 1 </li></ul></ul></ul><ul><ul><ul><li>If price of share is less than Rs. 500 then face value of share must be Rs. 10 </li></ul></ul></ul>
    8. 10. <ul><li>Fast Track Method </li></ul><ul><li>(Introduced by SEBI in November 2007) </li></ul><ul><ul><li>Listed companies making a public offering </li></ul></ul><ul><ul><li>Rights Issue </li></ul></ul><ul><li>SEBI approval of prospectus not required if: </li></ul><ul><ul><li>Issuer company is listed for last three years </li></ul></ul><ul><ul><li>Average market cap is greater than Rs 10,000 Crores </li></ul></ul><ul><ul><li>95% of investor grievances redressed (till last quarter) </li></ul></ul><ul><ul><li>No SEBI proceedings pending </li></ul></ul><ul><ul><li>Entire shareholding in dematerialized form </li></ul></ul>
    9. 11. <ul><li>Other Requisites for public offerings </li></ul>
    10. 12. <ul><li>Issue of shares or of convertible securities by a company to a select group of persons under Section 81(IA) of the Companies Act, 1956. </li></ul><ul><li>Conditions of preferential issue (Chapter XIII of DIP Guidelines) </li></ul><ul><ul><ul><li>Pricing as per the DIP guidelines </li></ul></ul></ul><ul><ul><ul><li>Continuous listing (Minimum public shareholding) </li></ul></ul></ul><ul><ul><ul><li>Existing shares of proposed allottee(s) in demat form </li></ul></ul></ul><ul><ul><ul><li>Lock in of pre-preferential allotment shareholding </li></ul></ul></ul><ul><ul><ul><li>No sale and transfer any equity shares for past 6 months </li></ul></ul></ul><ul><ul><ul><li>Non-transferability of instruments </li></ul></ul></ul><ul><ul><ul><li>Allotment must be completed within 15 days </li></ul></ul></ul>
    11. 13. <ul><li>Issue of shares or of convertible securities by a company to Qualified Institutional Buyers (“QIBs”) (Chapter XIIIA of DIP Guidelines) </li></ul><ul><li>Eligibility: </li></ul><ul><ul><ul><li>Equity shares listed for one year preceding the date of notice to shareholders </li></ul></ul></ul><ul><ul><ul><li>Minimum public shareholding to be maintained </li></ul></ul></ul><ul><li>Note: </li></ul><ul><ul><ul><li>No placement to QIB who is promoter or related to promoter </li></ul></ul></ul><ul><ul><ul><li>Pricing as per the DIP guidelines </li></ul></ul></ul><ul><ul><ul><li>Non applicability of Chapter XIII of DIP guidelines </li></ul></ul></ul>
    12. 14. <ul><li>Conditions: </li></ul><ul><li>Minimum Number of allottees: </li></ul><ul><ul><li>2, where the issue size is less than or equal to Rs. 250 Crores </li></ul></ul><ul><ul><li>5, where the issue size is greater than Rs. 250 Crores </li></ul></ul><ul><li>No single allottee shall be allotted more than 50% of the issue size. </li></ul><ul><li>Transfer restriction for 1 year (except on a stock exchange) </li></ul><ul><li>Minimum 10% allotment to mutual funds </li></ul>
    13. 15. <ul><li>Credit rating required </li></ul><ul><li>Debenture trustee must be appointed </li></ul><ul><li>Debentures not to be issued for acquisition of shares or providing loan to any company belonging to the same group. (Not to apply to FCDs converting within 18 months) </li></ul><ul><li>Company to create Debenture Redemption Reserve (“DRR”) </li></ul><ul><li>Debentures to be redeemed as per offer document </li></ul><ul><li>Offer document to specify the assets on which security is created and ranking of the charge </li></ul><ul><li>Premium amount and time of conversion to be determined by issuer company and disclosed </li></ul><ul><li>Interest rate on debentures to be freely determined by issuer company </li></ul>
    14. 16. <ul><li>SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997 (Takeover Code) </li></ul><ul><li>SEBI (Prohibition of Insider Trading) Regulations 1992 </li></ul><ul><li>SEBI (Bankers to an Issue) Regulations, 1994 </li></ul><ul><li>SEBI (Merchant Bankers) Regulations, 1992 </li></ul><ul><li>SEBI (Underwriters) Regulations, 1993 </li></ul><ul><li>SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 </li></ul><ul><li>SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 </li></ul>
    15. 17. New exchange for SMEs 21 days gap between closing and listing to be shortened to 7 days QIBs to pay 100% upfront for IPOs
    16. 18. <ul><li>Indian Companies can raise capital overseas by issue of: </li></ul><ul><li>Note: Indian companies listing overseas must either before or simultaneously list on the Indian stock exchanges </li></ul>
    17. 19. <ul><ul><li>Companies Act, 1956 </li></ul></ul><ul><ul><li>SEBI DIP Guidelines </li></ul></ul><ul><ul><li>Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 (“FCCB Scheme”) </li></ul></ul><ul><ul><li>Issue of Foreign Currency Exchangeable Bonds Scheme,2008 </li></ul></ul><ul><ul><li>Foreign Exchange Management Act, 1999 (“FEMA”) </li></ul></ul><ul><ul><li>Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 </li></ul></ul><ul><ul><li>External Commercial Borrowing Policy (“ECB Policy”) </li></ul></ul><ul><ul><li>Foreign Direct Investment Policy (“FDI Policy”) </li></ul></ul>
    18. 20. <ul><li>DRs represent shares of an Indian company trading on a foreign stock exchange </li></ul><ul><li>The DR holders are part of foreign holding in a company but unlike FDI, investors in DRs do not enjoy voting rights </li></ul><ul><li>DRs of most Indian companies experienced a sharp fall due to market meltdown. However, recently the DRs have recovered and trading turnovers have improved. </li></ul><ul><li>DRs have become popular because of two-way fungibility </li></ul><ul><li>No prior approval of SEBI, RBI or government is required for issue of DRs </li></ul><ul><li>No restrictions on the use of proceeds except investment in real estate and the stock markets </li></ul>
    19. 21. <ul><li>Foreign currency convertible bonds are debt instruments which are convertible into equity of the company at a later point of time </li></ul><ul><li>Both FDI and ECB policies are applicable </li></ul><ul><li>Coupon rate must not exceed 300 basis points over SBI PLR </li></ul><ul><li>RBI approval required for companies other than companies who can access ECB under automatic route and for all companies raising more than US$ 500 million </li></ul><ul><li>Restriction on use of proceeds </li></ul><ul><li>US$ 20 million can be raised for rupee expenditure </li></ul><ul><li>Proceeds to be parked abroad till required in India </li></ul><ul><li>Preferred by companies for raising funds for overseas expansions and acquisitions </li></ul>
    20. 22. <ul><ul><li>FCEB Scheme was notified on February 15, 2008 </li></ul></ul><ul><ul><li>A security offered by an issuing company and subscribed to by investors living outside India and exchangeable into equity shares of another company, which is called the offered company. </li></ul></ul><ul><ul><li>The issuing company must be a part of the promoter group and must hold the equity shares being offered at the time of issuing FCEBs. The offered company has to be a listed company, which is engaged in a sector eligible to receive FDI and eligible for ECB. </li></ul></ul>
    21. 23. <ul><ul><li>RBI is still considering the instrument </li></ul></ul><ul><ul><li>No guidelines for FCEBs issued by RBI yet </li></ul></ul><ul><ul><li>RBI is unsure how FCEBs would work within existing framework of ECB Policy </li></ul></ul><ul><ul><li>Lack of transparency regarding use of the funds according to RBI </li></ul></ul><ul><ul><li>Issues on monitoring of the FDI cap on companies when bonds raised by one company gets converted into equity of another company. </li></ul></ul>
    22. 24. <ul><ul><li>Choice of stock exchange depends upon: </li></ul></ul><ul><ul><li>New York Stock Exchange (NYSE) </li></ul></ul><ul><ul><ul><li>NYSE has 11 Indian companies listed on NYSE. </li></ul></ul></ul><ul><ul><ul><li>Positive: IFRS accounting norms permitted </li></ul></ul></ul><ul><ul><ul><li>Negative: SOX compliance is very costly. Only very large companies therefore list on NYSE </li></ul></ul></ul>Depth of the Market Availability of Funds Regulatory Requirements
    23. 25. <ul><ul><li>NASDAQ </li></ul></ul><ul><ul><ul><li>Listing is expensive </li></ul></ul></ul><ul><ul><ul><li>3 Indian companies listed </li></ul></ul></ul><ul><ul><li>London Stock Exchange (LSE) (Main Market) </li></ul></ul><ul><ul><ul><li>Caters to large companies </li></ul></ul></ul><ul><ul><ul><li>Has been a favorite with large Indian companies </li></ul></ul></ul><ul><ul><ul><li>Regulatory requirements are stringent </li></ul></ul></ul><ul><ul><li>Alternative Investment Market (AIM) </li></ul></ul><ul><ul><ul><li>Constituted in 1995, London’s AIM has been very successful in attracting overseas companies/funds </li></ul></ul></ul><ul><ul><ul><li>lower entry barriers </li></ul></ul></ul><ul><ul><ul><li>a lighter touch on regulation and compliance </li></ul></ul></ul><ul><ul><ul><li>comparative flexibility </li></ul></ul></ul>
    24. 26. <ul><ul><li>Luxembourg Stock Exchange (LuxSE) </li></ul></ul><ul><ul><ul><li>Traditional favourite </li></ul></ul></ul><ul><ul><ul><li>Listing is expeditious </li></ul></ul></ul><ul><ul><ul><li>Cost of raising funds at Luxembourg is lower, compared to NYSE or NASDAQ </li></ul></ul></ul><ul><ul><ul><li>Compliance requirements are less stringent </li></ul></ul></ul><ul><ul><li>Singapore Stock Exchange (SGX) </li></ul></ul><ul><ul><ul><li>Listing is less expensive </li></ul></ul></ul><ul><ul><ul><li>Has large appetite for certain sectors such as shipping </li></ul></ul></ul><ul><ul><ul><li>Regional hub </li></ul></ul></ul><ul><ul><li>Hong Kong Stock Exchange (HKEx) </li></ul></ul><ul><ul><ul><li>Offers world-class listing platform </li></ul></ul></ul><ul><ul><ul><li>Costs of listing and compliance are competitive </li></ul></ul></ul>
    25. 27. <ul><ul><li>Dubai International Financial Exchange (DIFX) </li></ul></ul><ul><ul><ul><li>Set up in September 2005 </li></ul></ul></ul><ul><ul><ul><li>Fast attracting attention especially of SMEs </li></ul></ul></ul><ul><ul><ul><li>Expeditious listing </li></ul></ul></ul><ul><ul><ul><li>Closer home and good liquidity </li></ul></ul></ul><ul><ul><li>Tokyo Stock Exchange (TSE) </li></ul></ul><ul><ul><ul><li>Japan is keen to promote TSE and Japanese Depository Receipts (“JDRs”) and attract foreign companies </li></ul></ul></ul><ul><ul><li>Asia Pacific Technology Exchange (APTEX) </li></ul></ul><ul><ul><ul><li>New Australian stock exchange with a focus on technology </li></ul></ul></ul><ul><ul><ul><li>Plans to become fully operational by second half of 2008 </li></ul></ul></ul>
    26. 29. GDP growth forecast for India: 2008-09 CMIE 9.5% IBs 7.0 to 8.4% IMF 7.9% GDP growth in India: 2007-08 – 8.7% Inflation scenario for India: 2008-09 CMIE 5.5% RBI comfort level (Feb ‘08) 5% Trade Deficit has widened over the past year
    27. 30. Rs. 39,98,887 Crores Money supply in the economy as on March 03, 2008 Interest Rates Representing a Y on Y increase of 21% Bank Lending Rates (2007-08) 12.75% to 13.25% Repo Rate: 7.75% Reverse Repo Rate: 6% Exchange Rate Rs./ $ Year Rs. /$ 2006-07 45.28 2007-08 Qtr 1 41.25 Qtr 2 40.54 Qtr 3 39.47 Qtr 4 39.83 2008-09 39.95 (Week ending Apr 18) RBI purchased US$ 75.4 billion from currency market in 2007-08 till Feb ‘08 Total foreign funds inflow in 2006-07 : US$ 29.1 billion Total foreign funds inflow is 2007-08 (till Feb ’08) : US$ 56.4 billion
    28. 31. <ul><ul><li>Although there are negative factors like the gloomy global markets , pressure on the export market due to rupee appreciation , rising inflation rate on one hand, on the other hand India has a strong growth story </li></ul></ul><ul><ul><li>Lets hope good times are ahead! </li></ul></ul>

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